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Notes to Accounts of Kansai Nerolac Paints Ltd.

Mar 31, 2017

Level 1 : quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 : inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 : inputs for the asset or liability that are not based on observable market data (unobservable inputs).

When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

* Net block includes BuildingsRs,0.35 Crores (2015-2016Rs,0.37 Crores, 1st April, 2015Rs,0.38 Crores), Plant and Equipment ? 14.08 Crores (2015-2016Rs,9.25 Crores, 1st April, 2015Rs,6.72 Crores) and Furniture and FixturesRs,0.24 Crores (2015-2016Rs,0.16 Crores, 1st April, 2015Rs,0.04 Crores).

3. Figures in the brackets are the corresponding figures in respect of the previous year.

4. No items of Property, Plant and Equipment were pledged as security for liabilities during any part of the current and comparative periods other than as disclosed in Note 19(a).

5. Nil amount of borrowing costs is capitalized during the current and comparative periods.

6. Nil amount of impairment loss is recognized during the current and comparative periods.

Note 7:

The Company has given Colour Dispenser Machines on operating lease to its dealers. Particulars in respect of such leases are as follows:

(a) (i) The gross carrying amount and the accumulated depreciation at the Balance Sheet date areRs,246.35 Crores (2015-2016Rs,217.34

Crores, 1st April, 2015Rs,191.38 Crores) andRs,183.71 Crores (2015-2016Rs,163.56 Crores,1st April, 2015Rs,145.54 Crores) respectively.

(ii) Depreciation recognized in the Standalone Statement of Profit and Loss isRs,20.15 Crores (2015-2016Rs,18.02 Crores).

(b) The Company enters into three years cancellable lease agreements. However, the corresponding lease rentals may be receivable for a shorter period or may be waived off. The minimum aggregate lease payments to be received in future is considered asRs,Nil. Accordingly, the disclosure of the present value of minimum lease payments receivable at the Balance Sheet date is not made.

8. Figures in the brackets are the corresponding figures in respect of the previous year.

9. Nil amount of borrowing costs is capitalized during the current and comparative periods.

10. Nil amount of impairment loss is recognized during the current and comparative periods.

11. During the financial year, no rental income was generated from the investment properties whereas direct operating expenses ofRs,0.40 Crores (2015-2016Rs,0.30 Crores) were incurred and recorded as expense in the Standalone Statement of Profit and Loss.

12. Total fair value of Investment Property isRs,1362.70 Crores (2015-2016Rs,1223.70 Crores, 1st April, 2015Rs,1204.14 Crores).

Fair Value Hierarchy

The fair value of investment property has been determined by external independent property values, having appropriate recognized professional qualification and recent experience in the location and category of the property being valued.

The fair value measurement for all of the investment property has been categorized as a level 3 fair value based on the inputs to the valuation techniques used.

Description of Valuation Technique used:

The Company obtains Independent Valuations of its investment property as at the year end. The fair value of the investment property have been derived using the Direct Comparison Method. The direct comparison approach involves a comparison of the investment property to similar properties that have actually been sold in arms-length distance from investment property or are offered for sale in the same region. This approach demonstrates what buyers have historically been willing to pay (and sellers willing to accept) for similar properties in an open and competitive market, and is particularly useful in estimating the value of the land and properties that are typically traded on a unit basis. This approach leads to a reasonable estimation of the prevailing price. Given that the comparable instances are located in close proximity to the investment property; these instances have been assessed for their vocational comparative advantages and disadvantages while arriving at the indicative price assessment for investment property.

13. Figures in the brackets are the corresponding figures in respect of the previous year.

14. Nil amount of borrowing costs is capitalized during the current and comparative periods.

15. Nil amount of impairment loss is recognized during the current and comparative periods.

Securities Premium

Securities premium is used to record the premium received on issue of shares. It is utilized in accordance with the provisions of the Companies Act, 2013.

Dividend

For the year 2014-2015, the Directors had recommended and Shareholders had approved a dividend of 140% ('' 1.40 per share). For the year 2015-2016, the Directors had recommended and Shareholders had approved a dividend of 305%, including special dividend of 125%, ('' 3.05 per share), which has been accounted in current year. For the year 2016-2017, the Directors have recommended a normal dividend of 250% ('' 2.50 per share) and a special dividend of 50% ('' 0.50 per share), thus aggregating to a total dividend of 300%('' 3.00 per share) for the year. The dividend proposed by the Directors is subject to approval of Shareholders at the annual general meeting. The proposed dividend ofRs,161.67 Crores alongwith dividend distribution tax ofRs,33.83 Crores have not been recognized as liabilities.

Note 16: Related Party Disclosures

A related party is a person or entity that is related to the entity that is preparing its financial statements

(a) A person or a close member of that person''s family is related to a reporting entity if that person:

(i) has control or joint control of the reporting entity;

(ii) has significant influence over the reporting entity; or

(iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.

(b) An entity is related to a reporting entity if any of the following conditions applies:

(i) The entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

(iii) Both entities are joint ventures of the same third party.

(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

(v) The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity.

(vi) The entity is controlled or jointly controlled by a person identified in (a).

(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

(viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the reporting entity or to the parent of the reporting entity.

A related party transaction is a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged.

Kansai Paints Co., Ltd. is the immediate and ultimate holding company of Kansai Nerolac Paints Ltd. and is based and listed in Japan. Financial Statements of Kansai Paints Co., Ltd. are available in public domain.

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity. Key management personnel includes

(1) Mr. H. M. Bharuka, Managing Director, (2) Mr. P. D. Chaudhari, Wholetime Director, (3) Mr. P. D. Pai, CFO and (4) Mr. G.T. Govindarajan, Company Secretary.

Assumptions regarding future mortality experience are set in accordance with the published statistics by the Life Insurance Corporation of India.

The Company contributes all ascertained liabilities towards gratuity to the fund maintained by the Life Insurance Corporation of India. The Company expects to contributeRs,6.53 Crores to the fund during the accounting year 2017-2018.

b. Provident Fund (Managed by the Trust set up by the Company)

The Company has contributedRs,1.90 Crores (2015-2016Rs,1.61 Crores) to the Provident Fund Trust. The Company has an obligation to fund any shortfall on the yield of the trust''s investments over the guaranteed interest rates on an annual basis. These administered rates are determined annually predominantly considering the social rather than economic factors and in most cases the actual return earned by the Company has been higher in the past years. The actuary has provided a valuation for provident fund liabilities on the basis of guidance issued by Actuarial Society of India and based on the below provided assumptions there is no shortfall:

c. Compensated Absences

The increase in provision for compensated absences for the year isRs,3.06 Crores (2015-2016Rs,1.07 Crores).

Note 17: Segment Reporting

The Management Committee of the Company, approved by the Board of Directors and Audit Committee performs the function of allotment of resources and assessment of performance of the Company. Considering the level of activities performed, frequency of their meetings and level of finality of their decisions, the Company has identified that Chief Operating Decision Maker function is being performed by the Management Committee. The financial information presented to the Management Committee in the context of results and for the purposes of approving the annual operating plan is on a consolidated basis for various products of the Company. As the Company''s business activity falls within a single business segment viz. ‘Paints'' and the sales substantially being in the domestic market, the financial statement are reflective of the information required by Ind AS 108 “Operating Segments”.

Note 18: Corporate Social Responsibilities

During the year, the Company has spentRs,6.46 Crores (2015-2016Rs,5.29 Crores) towards ‘Corporate Social Responsibility Activities'' (CSR Activities).

(a) Gross amount required to be spent by the Company during the year :Rs,8.32 Crores.

(b) Amount spent during the year on: Rs,in Crores

Note19:

During the previous year, management had detected some cases of fraudulent transfer of shares and wrongful payment of dividend by the Company''s Registrar and Transfer Agent M/s. Sharepro Services (India) Pvt. Ltd. Based on the current status of investigation conducted by the management, through Company’s internal auditors, the estimated amount involved in the fraud as at balance sheet date isRs,1.28 Crores (2015-16Rs,1.28 Crores) and provision for the same is made in the Standalone Statement of Profit and Loss. Further adjustments, if any required, would be considered by the Company on completion of the investigation.

Note 20: Profit on Sale of Non-Current Assets held for Sale

The Board of Directors of the Company had approved on June 29, 2015 the sale of the Company''s land at Perungudi, Chennai. The said asset was reclassified as Non-current Asset held for Sale.

The non-recurring fair value measurement for the Non-current Assets held for Sale had been categorized as a Level 3 fair value based on the inputs to the valuation techniques used.

On 30th March, 2016, the Company has sold its Perungudi Fixed Assets for a consideration ofRs,537.86 Crores. The Profit ofRs,535.34 Crores is disclosed as an exceptional item in the Standalone Statement of Profit and Loss. The Company has executed the deed of indemnity with the purchaser on 30 March 2016 to indemnify and agrees to defend and keep indemnified to the purchaser against the losses that the Purchaser is likely to suffer on account of any kind of any claim made in connection with the issues.

Note21: Explanation of transition to Ind AS :

(I) First-time adoption of Ind AS

These Standalone Financial Statements, for the year ended 31st March, 2017, are the first Ind AS compliant Standalone Financial Statements prepared by the Company. For the period upto and including the year ended 31st March, 2016, the Company has prepared its Standalone Financial Statements in accordance with accounting standards notified under Section 133 of the Companies Act, 2013 (to the extent notified) read together with Rule 7 of the Companies (Accounts) Rules, 2014, and other generally accepted accounting principles (GAAP) in India, to the extent applicable, under the historical cost convention, on the accrual basis of accounting.

Accordingly, the Company has prepared its first Standalone Financial Statements which comply with Ind AS applicable for the year ended on 31st March, 2017, together with comparative period data as and for the year ended 31st March, 2016, as described in the summary of significant accounting policies. In preparing these Standalone Financial Statements, the Company''s opening balance sheet was prepared as at 1st April, 2015, the Company''s date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its previous GAAP Financial Statements, including the balance sheet as at 1st April, 2015 and the Standalone Financial Statements as at and for the year ended 31st March, 2016.

(II) Exemption Applied

Ind AS 101 - First-time adoption of Indian Accounting Standards allows first-time adopters certain exemptions from the retrospective application of certain adjustments under Ind AS. The Company has applied the following exemptions:

(i) Deemed cost

Ind AS 101 - First-time adoption of Indian Accounting Standards permits a first-time adopter to elect to continue with the carrying value for all of its Property, Plant and Equipment as recognized in the Financial Statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for Intangible Assets, Investment Property and investments in subsidiaries.

Accordingly, the Company has elected to measure all of its Property, Plant and Equipment, Intangible Assets, Investment Property and Investments in Subsidiaries at their previous GAAP carrying value.

(ii) Business Combination

I nd AS 101 - First-time adoption of Indian Accounting Standards provides the option to apply Ind AS 103 - Business Combinations prospectively from the transition date or from a specific date prior to the transition date.

Accordingly, the Company has elected to apply Ind AS 103 - Business Combination prospectively to Business Combinations occurring after its transition date.

(iii) Government Grants

Ind AS 101 - First-time adoption of Indian Accounting Standards permits the Company to apply the requirements in Ind AS 109 - Financial Instruments, and Ind AS 20 - Accounting for Government Grants and Disclosure of Government Assistance, prospectively to government loans existing at the date of transition to Ind AS.

Accordingly, the Company has opted for exemption from retrospective application for fair valuation of such Government Grants (i.e. Sales Tax Deferral Loan)

(B) Financial Risk Management

The Company has exposure to the following risks arising from financial instruments:

— Credit Risk

— Liquidity Risk

— Market Risk

(i) Risk Management Framework

Risk Management Committee oversees the management of these risks. Management is supported by Risk Management Committee that advises on financial risks and the appropriate financial risk governance framework for the Company. The Risk Management Committee provides assurance to the management that Company''s risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company''s policies and risk objectives.

The Company''s Risk Management Policies are established to identify and analyses the risks faced by the Company to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk Management Policies and Systems are reviewed regularly to reflect changes in market conditions and the Company''s activities. The Company, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.

(ii) Credit Risk

Credit Risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company''s receivables from customers, loans and investments in debt securities. The carrying amounts of financial assets represent the maximum credit risk exposure.

Trade Receivables and Loans:

The Company''s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Risk Management Committee has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Company''s standard payment and delivery terms and conditions are offered. The Company''s review includes financial statements, credit agency information, industry information and in some cases bank references. Sales limits are established for each customer and reviewed constantly. Any sales exceeding those limits require approval from the management.

Financial Instruments and Cash Deposits:

Credit risks from balances with banks and financial institutions is managed by the Company''s Treasury Department in accordance with the Company''s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. The limits are set to minimize the concentration of risks and therefore mitigate financial loss through counterparty''s potential failure to make payments.

(iii) Liquidity Risk

Liquidity risk the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company''s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company''s reputation.

Maturities of Financial Liabilities:

The table below analyze the Company''s financial liabilities into relevant maturing grouping based on their contractual maturities:

(iv) Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market price comprises three types of risks: interest rate risk, currency risk and other price risk, such as equity price risk and commodity price risk. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. In respect of monetary assets and liabilities denominated in foreign currencies, the Company''s policy is to ensure that its net exposure is kept to an acceptable level.

Note 22:

Disclosure of Specified Bank Notes:

Schedule III of the Companies Act, 2013 was amended by Ministry of Corporate Affairs vide Notification G.S.R. 308(E) dated 30th March, 2017. The said amendment requires the Company to disclose the details of Specified Bank Notes held and transacted during the period from 8th November, 2016 to 30th December, 2016. For the purpose of this clause, the term ‘Specific Bank Notes'' shall have the same meaning provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs number S.O. 3407 (E), dated the 8th November, 2016.

Details of Specified Bank Notes held and transacted during the period from 8th November, 2016 to 30th December, 2016 are as follows:


Mar 31, 2015

Note 1.1

The Company has given on lease, Colour Dispenser to its dealers. Particulars in respect of such leases are as follows:

(a) (i) The gross carrying amount and the accumulated depreciation at the Balance Sheet date are Rs. 191.38 Crores (2013-2014Rs.168.57 Crores) and Rs. 145.54 Crores (2013-2014Rs.130.18 Crores) respectively.

(ii) Depreciation recognised in the Statement of Profit and Loss is Rs. 15.56 Crores (2013-2014Rs.15.10 Crores)

(b) The lease agreements are generally for a period of three years. However, the corresponding lease rentals may be receivable for a shorter period or may be waived off. The minimum aggregate lease payments to be received in future is considered as Rs. Nil. Accordingly, the disclosure of the present value of minimum lease payments receivable at the Balance Sheet date is not made.

Rs. in Crores

Year Ended Year Ended 31st March, 31st March, 2015 2014

Note 2.1:

Miscellaneous Expenses includes net loss of inventory due to flood Rs. 0.07 Crores (loss of inventory due to flood Rs. 5.21 Crores, netted off with insurance claim received/receivable Rs. 5.14 Crores)

Note 3: contingent Liabilities and commitments (to the extent not provided for)

Claims against the Company not acknowledged as debt:

Corporate guarantee given to HDFC Bank for employee loans 1.41 1.41

Service Tax. 3.22 —

Commitments:

Estimated amount of contracts remaining to be executed on capital account and not provided for (Net of advances) 3.68 5.21

8.31 6.62

The Company has made adequate provisions in the accounts for claims against the Company related to direct and indirect taxes matters, except for certain claims not acknowledged as debts, totalling to Rs. 3.22 Crores (2013-2014 Rs. Nil) from the Service Tax Authorities, in respect of disallowance of Service Tax Cenvat Credit shown in Note 26. In addition, the Company is subject to other legal proceedings in respect of other matters arisen in the ordinary course of business. The Company''s management is of the opinion that the ultimate liability in respect of these litigations shall not exceed the amount provided for in books of account, and shall not have any material adverse effect on the Company''s operation and financial position.

Note 4: Related Party Disclosures

(i) (a) Names of related parties and nature of relationship where control exists are as under:

Holding Company : Kansai Paint Co., Ltd., Japan

Subsidiary Company : Kansai Paints Nepal Pvt. Ltd.

(b) Names of other related parties and nature of relationship where there are transactions with related parties:

Fellow Subsidiary Companies

: Kansai Paint Philippines Inc.

Kansai Coatings Malaysia SDN. BHD. Kansai Paints Europe Ltd.

Key Management Personnel

: Mr. H. M. Bharuka, Managing Director Mr. P D. Chaudhari, Wholetime Director Mr. P D. Pai, Chief Financial Officer Mr. G. T. Govindarajan, Company Secretary

B. Defined Benefit Plan:

(a) Contribution to Provident Fund managed by the Trust set up by the Company:

The Company has contributed Rs. 1.48 Crores (2013-2014Rs.1.50 Crores) to the Provident Fund Trust. In view of the issue of final guidance note by the Acturial Society of India for measurement of provident fund liabilities, the actuary has accordingly provided valuation and other related information for disclosure as required by Accounting Standard (AS) 15 (Revised) on Employee Benefits notified by the Companies (Accounting Standards) Rules, 2006 read with the Guidance issued by the Accounting Standard Board of the Institute of Chartered Accountants of India.

vi. a. The estimates of rate of escalation in salary considered in actuarial valuation takes into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market.

b. The discounting rate is considered based on market yield on government bonds having currency and terms consistent with the currency and terms of the post-employment benefit obligations.

c. Expected rate of return on assets is determined based on expectation of the average long term rate of return expected on investments of the fund during the estimated term of the obligations.

(c) Compensated Absences:

The increase in provision for compensated absences for the year is Rs. 0.18 Crores (decrease in provision 2013-2014Rs.0.25 Crores)

Note 5: Segment Reporting

As the Company''s business activity falls within a single business segment viz. ''Paints'' and the sales substantially being in the domestic market, the financial statement are reflective of the information required by Accounting Standard 17 "Segment Reporting", notified under Companies (Accounting Standard) Rules, 2006.

Note 6: Corporate Social Responsibilities

Sec. 135 of the Companies Act, 2013 requires the Board of Directors to ensure that the Company spends in every financial year at least 2% of the average net profits of the Company made during the three immediately preceding financial years on Corporate Social Responsibility. Accordingly, the Company has spent Rs. 4.51 Crores towards Corporate Social Responsibility Activities. In accordance with the ''FAQ on Provisions of Corporate Social Responsibility under Section 135 of the Companies Act, 2013 and Rules thereon'', issued by the Institute of the Chartered Accountants of India, this amount has been recorded and disclosed as an appropriation of profit in the Financial Statements for the year ended 31st March, 2015.

(a) Gross amount required to be spent by the Company during the year Rs. 6.11 Crores.

(b) Amount spent during the year on:


Mar 31, 2014

Note 1: Contingent Liabilities

Claims against the Company not acknowledged as debt:

Notice from Haryana State Industrial and Infrastructure Development Corporation for enhanced costs for Bawal factory land - 39.01

Corporate guarantee given to HDFC Bank for employee loan 11.16 11.16

11.16 50.17

Note 2: Related Party Disclosures

(i) (a) Names of related parties and nature of relationship where control exists are as under:

Holding Company :Kansai Paint Co., Ltd., Japan

Subsidiary Company :Kansai Paints Nepal Pvt. Ltd.

(w.e.f. 01.10.2012)

(b) Names of other related parties and nature of relationship where there are transactions with related parties: Fellow Subsidiary Companies : Kansai Paint Philippines Inc.

Kansai Coatings Malaysia SDN. BHD. Kansai Paints Europe Ltd.

Key Management Personnel : Mr. H. M. Bharuka, Managing Director

Mr. P. D. Chaudhari, Wholetime Director

Note 31: Employee Benefits

A. Defined Contribution Plan:

Contribution to defined contribution plan, recognised in the Statement of Profit and Loss under Contribution to Provident and Other Funds in Employee Benefits for the year are as under:

B. Defined Benefit Plan:

(a) Contribution to Provident Fund managed by the Trust set up by the Company:

The Company has contributed Rs. 14.96 Million (2012-2013 Rs. 14.79 Million) to the Provident Fund Trust. In view of the issue of final guidance note by the Actuarial Society of India for measurement of provident fund liabilities, the actuary has provided valuation and other related information for disclosure as required by Accounting Standard (AS) 15 (Revised) on Employee Benefits notified by the Companies (Accounting Standards) Rules, 2006 read with the guidance issued by the Accounting Standard Board of the Institute of Chartered Accountants of India.

Note 3: Segment Reporting

As the Company''s business activity falls within a single business segment viz. ''Paints'' and the sales substantially being in the domestic market, the Financial Statement are reflective of the information required by Accounting Standard 17 "Segment Reporting", notified under Companies (Accounting Standard) Rules, 2006.


Mar 31, 2013

Note 1.1

The tangible assets at the Company''s pigment manufacturing unit at Kavesar and paint manufacturing units at Lower Parel and at Vatwa, have been retired from active use. Accordingly, the fixed assets (other than land) at those manufacturing units had been written down to Rs. 2.22 Million on the basis of valuation reports [balance provision for write down in the value of fixed assets as at the end of the year Rs. 5.89 Million (2011-2012 Rs. 7.00 Million)]. During the year, an amount of Rs. 1.11 Million (2011-2012 Rs. 1.30 Million) has been written back consequent to charge on account of depreciation of an equal amount.

Note 1.2

The Company has given on lease, Colour Dispenser to its dealers. Particulars in respect of such leases are as follows:

(a) (i) The gross carrying amount and the accumulated depreciation at the Balance Sheet date are Rs. 1551.85 Million (2011-2012 Rs. 1518.91 Million) and Rs. 1174.95 Million (2011-2012 Rs. 1266.25 Million) respectively.

(ii) Depreciation recognised in the Statement of Profit and Loss is Rs. 124.31 Million (2011-2012 Rs. 141.61 Million).

(b) The lease agreements are generally for a period of three years. However, the corresponding lease rentals may be receivable for a shorter period or may be waived off. The minimum aggregate lease payments to be received in future is considered as Nil. Accordingly, the disclosure of the present value of minimum lease payments receivable at the Balance Sheet date is not made.

Figures in the brackets are the corresponding figures in respect of the previous year.

* Excludes commission and related contribution to Provident Fund and Superannuation Fund thereon for the year but includes commission and such related contribution thereon for the previous year paid in the current year. Note: No amounts pertaining to related parties have been provided for as doubtful debts. Also, no amounts have been written off or written back during the year.

B. Defined Benefit Plan:

(a) Contribution to Provident Fund managed by the Trust set up by the Company:

The Company has contributed Rs. 14.79 Million (2011-2012 Rs. 13.53 Million) to the Provident Fund Trust. In view of the issue of final guidance note by the Actuarial Society of India for measurement of provident fund liabilities, the actuary has provided valuation and other related information for disclosure as required by Accounting Standard (AS) 15 (Revised) on Employee Benefits notified by the Companies (Accounting Standards) Rules, 2006 read with the guidance issued by the Accounting Standard Board of the Institute of Chartered Accountants of India.

vi. a. The estimates of rate of escalation in salary considered in actuarial valuation takes into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market.

b. The discounting rate is considered based on market yield on government bonds having currency and terms consistent with the currency and terms of the post-employment benefit obligations.

c. Expected rate of return on assets is determined based on expectation of the average long term rate of return expected on investments of the fund during the estimated term of the obligations.

vii. The above information is certified by the actuary.

(c) Compensated Absences:

The decrease in provision for compensated absences for the year is Rs. 2.82 Million (2011-2012 decrease Rs. 0.90 Million)

Note 2: Segment Reporting

As the Company''s business activity falls within a single business segment viz. ''Paints'' and the sales substantially being in the domestic market, the financial statement are reflective of the information required by Accounting Standard 17 "Segment Reporting", notified under Companies (Accounting Standard) Rules, 2006.


Mar 31, 2012

Note 9.2

The tangible assets at the Company's pigment manufacturing unit at Kavesar and paint manufacturing units at Lower Parel and at Vatwa, have been retired from active use. Accordingly, the fixed assets (other than land) at those manufacturing units had been written down to Rs 2.22 Million on the basis of valuation reports [balance provision for write down in value of fixed assets as at the end of the year Rs 7.00 Million (2010-2011 Rs 8.30 Million)]. During the year, an amount of Rs 1.30 Million (2010-2011 Rs 1.64 Million) has been written back consequent to charge on account of depreciation of an equal amount.

Note 9.3

The Company has given on lease, Colour Dispenser to its dealers. Particulars in respect of such leases are as follows:

(a) (i) The gross carrying amount and the accumulated depreciation at the balance sheet date are Rs 1518.91 Million (2010-2011 Rs 1364.50 Million) and Rs 1266.25 Million (2010-2011 Rs 1124.64 Million) respectively.

(ii) Depreciation recognised in the Statement of Profit and Loss is Rs 141.61 Million (2010-2011 Rs 121.56 Million)

(b) The lease agreements are generally for a period of three years. However, the corresponding lease rentals may be receivable for a shorter period or may be waived off. The minimum aggregate lease payments to be received in future is considered as Nil. Accordingly, the disclosure of the present value of minimum lease payment receivable at the balance sheet date is not made.

Figures in the brackets are the corresponding figures in respect of the previous year.

* Excludes commission and related contribution to Provident Fund and Superannuation Fund thereon for the year but includes commission and such related contribution thereon for the previous year paid in the current year.

Note: No amounts pertaining to related parties have been provided for as doubtful debts. Also no amounts have been written off or written back during the year.

B. Defined Benefit Plan:

(a) Contribution to Provident Fund managed by the Trust set up by the Company:

The Company has contributed Rs 13.53 Million (2010-2011: Rs 11.52 Million) to the Provident Fund Trust. In view of the issue of final guidance note by the Actuarial Society of India during the year for measurement of Provident Fund liabilities, the actuary has provided valuation and other related information for disclosure as required by Accounting Standard (AS) 15 (Revised) on Employee Benefits notified by the Companies (Accounting Standards) Rules, 2006 read with the Guidance issued by the Accounting Standard Board of the Institute of Chartered Accountants of India.

i. a. The estimates of rate of escalation in salary considered in actuarial valuation takes into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market.

b. The discounting rate is considered based on market yield on government bonds having currency and terms consistent with the currency and terms of the post-employment benefit obligations.

c. Expected rate of return on assets is determined based on expectation of the average long term rate of return expected on investments of the fund during the estimated term of the obligations.

ii. The above information is certified by the actuary.

Note 31: Segment Reporting

As the Company's business activity falls within a single business segment viz. 'Paints' and the sales substantially being in the domestic market, the financial statements are reflective of the information required by Accounting Standard 17 "Segment Reporting", notified under the Companies (Accounting Standards) Rules, 2006.

Note 32: Profit on Sale of long-term Investment

The Company had divested its entire stake in its erstwhile Associate Company, Nipa Chemicals Limited, for a consideration of Rs 257.25 Million.


Mar 31, 2011

(A) Post-employment benefits :

1. Provident and Family Pension Fund

The eligible employees of the Company are entitled to receive post employment benefits in respect of provident and family pension fund, in which both the employees and the Company make monthly contributions at a specified percentage of the employees eligible salary (currently 12% of employees eligible salary).

The contributions are made to the provident fund managed by the trust set up by the Company or to the Regional Provident Fund Commissioner (RPFC) which are charged to the profit and loss account as incurred.

In respect of contribution to RPFC, the Company has no further obligations beyond making the contribution, and hence, such employee benefit plan is classified as Defned Contribution Plan.

In respect of contribution to the trust set up by the Company, since the Company is obligated to meet interest shortfall, if any, with respect to covered employees, such employee benefit plan is classified as Defned Benefit Plan in accordance with the Guidance on implementing Accounting Standard (AS) 15 (Revised) on Employee Benefits.

2. Superannuation

The eligible employees of the Company are entitled to receive post employment benefits in respect of superannuation fund in which the Company makes annual contribution at a specified percentage of the employees eligible salary (currently 15% of employees eligible salary). The contributions are made to the Life Insurance Corporation of India (LIC). Superannuation is classified as Defned Contribution Plan as the Company has no further obligations beyond making the contribution. The Companys contribution to Defned Contribution Plan is charged to profit and loss account as incurred.

3. Gratuity

The Company has an obligation towards gratuity, a defned benefit retirement plan covering eligible employees. The plan provides a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service. The Company has obtained insurance policies with the Life Insurance Corporation of India (LIC) and makes an annual contribution to LIC for amounts notified by LIC. The Company accounts for gratuity benefits payable in future based on an independent external actuarial valuation carried out at the end of the year. Actuarial gains and losses are recognised in the profit and loss account.

(c) Other Long-Term Employee Benefits – Compensated Absences :

The Company provides for encashment of leave or leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits for future encashment / availment. The Company makes provision for compensated absences based on an independent actuarial valuation carried out at the end of the year. Actuarial gains and losses are recognised in the profit and loss account.

(i) Research and Development

Capital expenditure on Research and Development is treated in the same way as expenditure on fixed assets. Revenue expenditure on Research and Development is charged to the profit and loss account in the year in which it is incurred.

(ii) Foreign Currency Transactions

(a) Transactions in foreign currencies are recorded at the exchange rate that approximates the actual rate at the date of the transaction. In respect of monetary assets and liabilities denominated in foreign currencies, exchange differences arising out of settlement are recognised in the profit and loss account. Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the exchange rates on that date, the resultant exchange differences are recognised in the profit and loss account.

(b) Premiums or discounts arising at the inception of the forward foreign exchange contracts, other than contracts to hedge a firm commitment or a highly probable forecast transaction, are amortised and recognised in the profit and loss account over the period of the contract. Such forward foreign exchange contract outstanding as at the balance sheet date are converted at the exchange rates prevailing on that date. Exchange differences are recognised in the profit and loss account.

(iii) Accounting for Derivatives

Forward contracts to which Accounting Standard (AS) 11 – The Effect of Change in Foreign Exchange Rates is applicable, the accounting policy as stated in Note (xii) (b) above is followed. In respect of other derivative contracts including forward foreign exchange contracts to which the aforesaid accounting standard is not applicable are marked to market at the rate on the balance sheet date. The resultant exchange differences are recognised in the profit and loss account.

(iv) Taxation

Tax expense comprises current and deferred tax. Current tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act, 1961. Deferred tax refects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rate and tax laws enacted or substantially enacted as at the balance sheet date. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised in future; however, where there is unabsorbed depreciation or carry forward of losses, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to refect the amount that is reasonably / virtually certain (as the case may be) to be realised.

(v) Provisions and Contingent Liabilities

(a) A provision is recognised when an enterprise has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to their present values and are determined based on management estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to refect the current management estimates.

(b) Contingent liabilities are disclosed in respect of possible obligations that have arisen from past events and the existence of which will be confirmed only by the occurance or non-occurance of future events not wholly within the control of the Company.

(c) When there is an obligation in respect of which the likelyhood of outfow of resources is remote, no provision or disclosure is made.

(v) Leases

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased assets are classified as operating leases. Operating lease payments / receipts are recognised as an expense / income in the profit and loss account on a straight-line basis over the lease term.

3. The Company has made monthly payments aggregating Rs. 9.40 lacs (2009-2010 Rs. 9.40 lacs) towards post retirement arrangements to former wholetime directors.

* used for processing goods on behalf of Nipa Chemicals Limited, an erstwhile associate company.

(a) Figures in brackets are in respect of the previous year.

(b) Installed capacity has been certified by the Works Manager and accepted by the Auditors without verification, being a technical matter.

(c) Production does not include goods processed outside. Sales, opening stock and closing stock include goods processed and purchased from outside. The closing stock is after adjustments for obsolescence and shortages. Closing stock figures, if derived from opening stock plus production / purchases and less sales would therefore be different.

4. As the Companys business activity falls within a single business segment viz. Paints and the sales substantially being in the domestic market, the financial statements are refective of the information required by Accounting Standard 1 "Segment Reporting", notifed under the Companies (Accounting Standards) Rules, 2006.

5. Related party disclosures

(i) (a) Names of related parties and nature of related party relationship where control exists are as under:

Holding Company : Kansai Paint Co., Ltd., Japan

(b) Names of other related parties and nature of relationship where there are transactions with related parties

Fellow Subsidiary Companies : Kansai Paint Philippines Inc

Kansai Resin (Thailand) Co. Ltd.

Kansai Coatings Malaysia SDN. BHD.

Sime Kansai Paints SDN. BHD.

Associate – company in which the Company : Nipa Chemicals Limited has substantial interest (i.e. more than 20% in voting power) (Upto 14th January, 2011)

Key management personnel : Mr. H. M. Bharuka, Managing Director

Mr. P. D. Chaudhari, Wholetime Director

6. The Company has given on lease, colour dispenser to its dealers. The particulars in respect of such leases are as follows: (a) (i) The gross carrying amount and the accumulated depreciation at the balance sheet date are Rs. 13644.98 lacs (2009-2010 Rs. 12137.52 lacs) and Rs. 11246.37 lacs (2009-2010 Rs. 10030.75 lacs) respectively.

(c) The lease agreements are generally for a period of three years. However, the corresponding lease rentals may be receivable for a shorter period or may be waived off.

7. (a) Provision for indirect taxes:

With restructuring of the production facilities, the timing of the outflow of provision Rs. 2553.57 lacs (2009-2010 Rs. 2663.58 lacs) recognised in respect of matters relating to indirect taxes is dependent on the outcome of the settlement with the appropriate authorities.

(b) Provision for warranty:

The Company is selling certain products with a warranty of four to seven years. Accordingly, provision has been recognised on the basis of managements expectation of warranty claims on such products.

B. Defned Benefit Plan

(a) Contribution to provident fund managed by the trust set up by the Company:

According to the management, the actuary has opined that actuarial valuation cannot be applied to reliably measure provident fund liabilities in respect of fund managed by the trust set up by the Company in the absence of guidance from the Actuarial Society of India. Accordingly, the Company is currently not in a position to provide other related disclosures as required by Accounting Standard (AS) 15 (Revised) on Employee Benefits notified by the Companies (Accounting Standards) Rules, 2006 read with the Guidance issued by the Accounting Standards Board of the Institute of Chartered Accountants of India. Having regards to the assets of the fund and the return on investments, the entity does not expect any significant deficiency in the foreseeable future. Accordingly, no provision is required towards the guarantee given for notified interest rates. During the year, the Company has contributed Rs. 115.18 lacs (2009-2010: Rs. 103.89 lacs) to the Provident Fund Trust.

vi. (a) The estimates of rate of escalation in salary considered in actuarial valuation take into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market.

(b) The discounting rate is considered based on market yield on government bonds having currency and terms consistent with the currency and terms of the post-employment benefit obligations.

(c) Expected rate of return on assets is determined based on expectation of the average long term rate of return expected on investments of the fund during the estimated term of the obligations.

vii. The above information is certified by the actuary.

viii. Net assets / (liabilities) recognised in the balance sheet as at respective year ends and experience adjustments:

(c) Compensated Absences

The increase in provision for compensated absences for the year is Rs. 33.05 lacs (2009-2010 Rs. 115.98 lacs).

8. Derivatives Instruments: (contd.)

B. The year-end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below:

(a) Amounts payable in foreign currency CHF 1.06 lac [2009-2010 – CHF 0.04 lac]

Euro 0.28 lac [2009-2010 – Euro 0.68 lac]

GBP 0.10 lac [2009-2010 – GBP 0.79 lac]

JPY 813.19 lacs [2009-2010 – JPY 423.45 lacs]

SGD 0.09 lac [2009-2010 – SGD Nil]

USD 44.93 lacs [2009-2010 – USD 43.45 lacs]

(b) Advance payment in foreign currency for supplies CHF 1.85 lac [2009-2010 – CHF 0.68 lac]

Euro 0.99 lac [2009-2010 – Euro 0.50 lac]

GBP Nil [2009-2010 – GBP 0.11 lac]

JPY 295.81 lacs [2009-2010 – JPY 146.82 lacs]

SGD 0.18 lac [2009-2010 – SGD Nil] USD 11.66 lacs [2009-2010 – USD 3.04 lacs]

9. The Company has divested its entire stake in its erstwhile associate company, Nipa Chemicals Limited, for a consideration of Rs. 2572.51 lacs.

10. Prior years figures have been regrouped and rearranged wherever necessary to confirm to current years classification.


Mar 31, 2010

1. The Company has made monthly payments aggregating Rs. 9.30 lacs (2008-2009 Rs. 9.72 lacs) and payments in respect of medical reimbursement aggregating Rs. 0.10 lac (2008-2009 Rs. 0.10 lac) towards post retirement arrangements to former Wholetime Directors.

2. As the Companys business activity falls within a single business segment viz. Paints and the sales substantially being in the domestic market, the disclosure requirements of Accounting Standard - 17 "Segment Reporting", notified under the Companies Act, 1956 is not applicable.

3. Related party disclosures

(i) (a) Names of related parties and nature of related party relationship where control exists are as under:

Holding Company : Kansai Paint Co., Ltd., Japan

Subsidiary Company : Kansai Coatings Malaysia SDN. BHD.

30th June, 2008)

(b) Names of other related parties and nature of relationship where there are transactions with related parties:

Fellow Subsidiary Companies : PT. Kansai Paint Indonesia Kansai Paint Philippines Inc Chongqing Kansai Paint Co.,Ltd. Kansai Resin (Thailand) Co. Ltd. Kansai Coatings Malaysia SDN. BHD. (w.e.f. 1st July, 2008)

Associate - company in which the Company has : Nipa Chemicals Limited substantial interest (i.e. more than 20% in voting power)

Key management personnel : Mr. H. M. Bharuka, Managing Director

Mr.P.D.Chaudhari, Wholetime Director (w.e.f. 1st May, 2008)

4. Employee Benefits

B. Defined Benefit Plan

(a) Contribution to provident fund managed by the trust set up by the Company:

According to the management, the actuary has opined that actuarial valuation cannot be applied to reliably measure provident fund liabilities in respect of fund managed by the trust set up by the Company in the absence of guidance from the Actuarial Society of India. Accordingly, the Company is currently not in a position to provide other related disclosures as required by Accounting Standard (AS) 15 (Revised) on Employee Benefits notified by the Companies (Accounting Standards) Rules, 2006 read with the Guidance issued by the Accounting Standards Board of the Institute of Chartered Accountants of India. Having regards to the assets of the fund and the return on investments, the entity does not expect any deficiency in the foreseeable future. Accordingly, no provision is required towards the guarantee given for notified interest rates. During the year, the Company has contributed Rs. 103.89 lacs (2008-09: Rs. 94.10 lacs) to the Provident Fund Trust.

vi. a. The estimates of rate of escalation in salary considered in actuarial valuation take into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market.

b. The discounting rate is considered based on market yield on government bonds having currency and terms consistent with the currency and terms of the post-employment benefit obligations.

c. Expected rate of return on assets is determined based on expectation of the average long term rate of return expected on investments of the fund during the estimated term of the obligations.

vii. The above information is certified by the actuary.

5. Derivatives Instruments

B. The year-end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below:

(a) Amounts payable in foreign currency

Euro 0.68 lac [2008-2009 - Euro 1.96 lacs] GBP 0.79 lac [2008-2009 - GBP Nil lac] JPY 423.45 lacs [2008-2009 - JPY 116.39 lacs] USD 45.45 lacs [2008-2009 - USD 1.15 lacs] CHF 0.04 lac [2008-2009 - CHF Nil]

(b) Advance payment in foreign currency for supplies

CHF 0.68 lac [2008-2009 - CHF 0.15 lac] Euro 0.50 lac [2008-2009 - Euro 0.95 lac] GBP 0.11 lac [2008-2009 - GBP 0.01 lac] JPY 146.82 lacs [2008-2009 - JPY 6.06 lacs] SGD Nil [2008-2009 - SGD 0.13 lac] USD 3.04 lacs [2008-2009 - USD 1.76 lacs]

6. Prior years figures were audited by a firm of chartered accountants other than B S R & Co, which have been regrouped and rearranged wherever necessary to confirm to current years classification.

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